Consider the Following Short Case as You Respond to the Question

question 18

Multiple Choice

Consider the following short case as you respond to the question: SPC Corporation sells computer security software.They maintain their AIS using general ledger software; data files are backed up twice a day.Sales staff can access the customer database, inventory files and general ledger, as well as sales-related documents such as invoices and sales orders.Newly hired sales staff members at SPC receive the company procedures manual which explains the process used to complete the steps in the sales/collection process.To minimize costs, SPC designates up to five sales staff members each month who can do credit checks for all new customers in addition to processing sales.SPC bills its clients monthly and uses the balance forward method of accounting for receivables; all cash receipts from clients are processed using a lockbox procedure.The lockbox firm's fee is 3% of all collections.SPC's accounting department estimates bad debts at the end of each fiscal year; they are normally about 1% of total sales.Which of the following statements about SPC is most true?

• A)Their sales/collection process demonstrates the strongest possible level of internal control.
• B)Their risk exposures include credit risk, systems risk and human error risk.
• C)Both their sales/collection process demonstrates the strongest possible level of internal control and their risk exposures include credit risk, systems risk and human error risk are true.
• D)Neither their sales/collection process demonstrates the strongest possible level of internal control nor their risk exposures include credit risk, systems risk and human error risk is true.

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Definitions:

Nerve Fibers

Extensions of nerve cells that transmit electrical impulses between different parts of the body, essential for communication within the nervous system.

Glial Cell

Cells within the central and peripheral nervous system that are not neurons, which serve to support and safeguard neuronal cells.

Oligodendrocyte

A type of glial cell in the central nervous system that produces myelin, a substance that insulates nerve fibers to enhance signal transmission.

Myelin Sheath

A layer of protective insulation that covers nerve fibers, enhancing the speed and efficiency of electrical signal transmission along the nervous system.